Gilead Sciences, Inc. ($GILD)

Fantastic. Thank you so much for all being here today. I am thrilled to be on the stage here with Dan O'Day, the Chairman and Chief Executive Officer of Gilead Sciences. This is a company we follow a lot. We spend a lot of time thinking about. And we're very excited to give you an optimality to tell the Gilead story to a broad set of investors. Perhaps I'll start with letting you just give some opening remarks to contextualize kind of Gilead the story where we're at today and what's on the horizon. And then I've got some Q&A that I would love to go through. For all of those in the room as well, please do see there's a QR code dotted around in multiple places. I think on your lanyards as well. Please feel free to use this to add questions to the pigeon hole. And I can then integrate them into the conversation. I really want to make sure it's as relevant as possible for everyone in the room, and we get through the questions that are most important to you all. So with that, Dan would love to get some opening remarks and hear a little bit about the Gilead story.

Right. Well, Courtney, thank you for having me. I'm delighted to have this chance to chat with you as well and to be with all of you. I think the key message for Gilead right now is that we're really in a position of strength. After 7 years of concentrating in our strategy, diversifying the business, we really are in a position where we have the strongest portfolio that we've actually ever had in our history. And I say that with humility, based upon what Gilead achieved before I came, -- but our ability to kind of produce robust and sustainable growth has never been stronger. We have up to 10 ongoing or to be expected launches between now and the end of 2027, and that's across all 3 of our therapeutic areas. So it's kind of 1 of the proof points. In fact, this year alone, we've got 4 potential approvals, new medicine approvals. One we just actually had with Hepcludex the other day, but 3 more to come this year and 5 Phase III readouts and that will continue, of course, into 2027. That, combined with a keen focus on operating expenditure discipline, we are comfortably in the top quartile of the margins of the industry. We expect to continue to stay that way with a focus on operating expenses and disciplines. We've got a strong balance sheet, good cash flows. So I think we're really poised right now to be able to make an even bigger impact on patients and a compelling story for investors.

Fantastic. No, it is certainly an exciting time of expansion and diversification at Gilead. We were chatting about this before we dive into the conversation and kind of opened this up for everyone, but 2025 was a year of significant pressures from the policy side of the equation. tariffs kind of onshoring manufacturing, all these different topics. As we move through 2026, does it feel like much of that overhang is now behind us. And how is this year different from last year? What is it -- what has shifted and where you're able to spend your time and energy?

Yes. Thanks for the question. I mean, first, what I would say is just to contextualize 2025, it was actually an incredibly strong year for Gilead. We grew our base business at around 4%. That despite the fact that it was -- it was a year where we had to offset a Medicare Part D reform of about $1.2 billion across our business. So the underlying business growth was even stronger than that. And perhaps probably the biggest highlight, although there are many highlights in 2025 was the launch of BSI Go, which is what I'm sure we'll talk about, but it's just in the very early stages of really making a big difference for prevention. So relative to the kind of the policy environment in 2026, I think there is, I think, greater certainty in 2026 than there was in 2025. We're 1 of the companies that did into an agreement with the U.S. government that I think allowed us to preserve our growth business, but also contribute to affordability of medicines in the United States, but without damaging our innovation cycle overall. But what I would say is because you're never quite sure what the next policy is going to be in this country in any country. And what I've learned after lots of decades in this business, is that you have to have an underlying business that can weather those headwinds. And I think we really do right now. I mean back to what our business is today, we've got a really robust pipeline. I've already mentioned the 4 launches and the 5 Phase III readouts. You need really strong innovation to weather any headwind. And I think the type of innovation we have leave a net cell coming out, big Glen and others. I mean it's really kind of transformational medicines. And those medicines -- that's the starting and perhaps the ending point for all of this. If you have truly transformational medicines, they make their way through policy headwinds. But in addition to that, of course, we're highly focused on the execution of our launches, continue to drive our portfolio, keen attention to operating expenditures. And the fact that we've been able to navigate headwinds in the past, like I just mentioned in 2025, gives us a lot of confidence in even the unknowns that may come in the future for this. In terms of our focus as a company, strategy is a long-term, long-term game in our industry. And what I'm really impressed by what the team is able to do is just we've stuck with our strategy of diversifying within virology, and we have many, many launches in HIV that I know that we'll talk about that will help us diversify our business within HIV. We don't have any major patent loss of exclusivity until 2036, and lots of time to kind of allow us to diversify that overall HIV business in both treatment in a growing prevention market. But then also the strength of our oncology business today and the expected launches, including first-line triple-negative breast cancer for TRODELVY, which we're expecting in the second half of this year as well as well as a needle cell launch gives us really -- those are near-term activities. I'm sure we'll also talk about tubules and some of the other aspects of the oncology portfolio, that gives us a lot of confidence in the growing oncology differentiated business to differentiate outside of urology, so to speak. And then a really exciting inflammation portfolio that we'll be reporting more data on this year around some novel small molecules that we think really have the chance to make a difference in that large inflammation autoimmune space as well. So -- that's kind of how we think we're going to stick with that focus. It's important to have a focus. It's important to execute every quarter. But I think that strategy has served us well to date, and we're still very much in the middle of rolling that strategy out. So we want to stay focused on that regardless of things that may be happening outside the company.

Absolutely. And 1 of the things that I think Gilead was perhaps in a better position to weather last year than some of the other pharma companies was around manufacturing geolocations and kind of where you were based. And you've got a very strong local manufacturing footprint in Gilead. Did that mean that you kind of -- did you need to make any more additional manufacturing commitments for onshoring with this administration? And how is the the policy pressures or the policy changes or the Tax Cuts and Jobs Act, influencing how you then think about manufacturing locations as you expand that portfolio that you just touched on, the inflammation, the oncology, et cetera?

Yes. I mean maybe to start with. Gilead is going to be celebrating its 40th birthday next year. It's a U.S.-based company. The last -- the largest -- the large majority of our footprint is in the United States. That includes probably greater than 90% of our R&D is in the United States, but certainly, the vast majority of our manufacturing base is here, too. Now having said that, so -- and we've said in the past, as a result of that because the vast majority of our IP is also domiciled in the United States, our exposure to any potential future tariffs was always on the low end side. And certainly, nonsector tariffs that we're managing today are very manageable within our guide and within our business. But what I would say is because of the growth that I just spoke about, we do need to continue to invest. And we announced last year around 32 additional $1 billion of investment over the next several years in both manufacturing and research facilities in the U.S. We've got buildings going up right now at our headquarter campus in Foster City and both the research side and the manufacturing side just to kind of manage our growing portfolio. We've got facilities in Maryland and elsewhere for our cell therapy business. So I think we've got a really robust -- well, first of all, we have a global supply chain that has multiple redundancies into to handle issues associated with geopolitical concerns, number one. Number two, we are continuing to invest around the globe, but disproportionately in the United States to make sure that we have products here for our most important and largest market in the world. So I think those are -- that's kind of the way we think about it. Again, these are long-term decisions that can't be overly influenced by short-term policy. But I think we're in a very good position vis-a-vis U.S. policy.

Fantastic. That's super helpful, poll context setting. And particularly, as you touched on those focus areas of the business, kind of I do want to dive into years to go. Of course, this is an incredibly important product for those in the audience that don't know the. This is an HIV prevention product twice yearly injection in contrast to what has largely been a once-daily market up until this point. You've also got a once daily, that's been in the market for a long time as well. How should we think about the kind of progression of patients coming into this market particularly into years to go, what are new patient starts going to look like as we think about the evolution of the prep market. It's obviously relatively nascent compared to the HIV treatment market, much newer. But how should we think about the progression? Where will we see that growth come from? Is it going to be at the cannibalization impact to other parts of your business? How do we think about kind of years to go as a net add to Gilead's growth in the future?

And you framed it really well, just to make sure we're -- everybody understands what we're talking about. So I mean the treatment business is a large business today. It grows at about 2% to 3% a year. And I think there's opportunity with long-acting treatment to get to portions of the population that have HIV in this country and around the world that aren't well served by a daily oral today, which is part of we may speak about that part of our long-acting program in treatment. In fact, you'd be surprised to probably know that 30% or so of people that are -- that have HIV in this country are not virologically suppressed because either because of their living circumstance or because they just may not have access to healthcare. But taking a daily pill can be difficult. But we're going to see continued evolution in the treatment market over time that will be important. But to your point, the prevention market is really quite new in the grand scheme of things. And just to put that into context, CDC had identified about 1.2 million people in this country that can benefit from PrEP. That's been the number they've used for the past 5 or 6 years. Recently, they updated that to around 2.2 million people. So they more than doubled it. And part of that is, of course, the evolution of technology because again, just as I mentioned with treatment, it can sometimes be difficult for people to take a daily pill. Can you imagine if you don't have a disease, how difficult it is to be compliant on a daily pill regimen. It's not good. It's less than 50% compliance for people that are on prep today. But maybe just -- so it's an evolving market. And very importantly, I mean, our objective is to end HIV globally over the coming decades. But the only bill you have to do that is to, number one, make sure that everybody has HIV is well treated because if they're well treated, they can't pass the disease on. So that's 1 way you stop the infection rate. And the second piece, which is why prevention is so important is you've got to get at people that have the potential to be exposed to the virus and put them on prep. Both of those combined over decades, I think, eventually stops it. But the reason that long-acting prevention and lenacapavir is so important is because so few people that can benefit from PrEP are either on it today or compliant with it today. So just to put that $1.2 million figure, the $2.2 million figure into context, in 2022, there were only about 200,000, 250,000 people on PrEP in this country today. It's actually grown significantly. So now we're at about 0.5 million people that are on prep today as we expect to hear today. We expect that market to grow to more than 1 million or at least 1 million people by the mid-2030s. So there's tremendous expansion of people on prep, which is the first thing. But secondly, the ability -- to improve with the long acting. So if you think about it, with a once every 6-month injection, you essentially assure compliance for 6 months. And then, of course, when people come back, you assure compliance for another 6 months and another 6 months. So it's really -- it's been touted as 1 of the most important advances in HIV and for good reason because if you can really assure that compliance when people are potentially exposed to the virus, then you can really reduce it. So it's good for people, most importantly, it's good for payers. -- because if they're going to be reimbursing something, they want to make sure it has the impact. So all of this comes together suggests that we've got tremendous growth potential with long-acting prep and lunicapavir in particular. Just to put that into context, while I said the treatment market grows about 2% to 3%, the PrEP market today is growing around 14%. Our business -- our prep business in the first quarter this year grew 87%, just to put that into context with lenacapavir entering the market. And what I'm trying to give you an impression of is we're still at the very early stages of kind of penetrating that market over time. So long acting, just out the door is very good. Yes, 2 goes after a very good launch. Only about less than a year since we received the approval. And we're already working on other opportunities to extend that. We actually have a once-a-year program that has been fully enrolled now, and we expect to potentially be launching a once-a-year version of this as early as 2028. So these are really important dynamics, of course, for our business, but also for the societal impact that it can have.

Absolutely. And as you think about that once year opportunity, does this translate to a pure increase in adherence? Or do we think that this perhaps entices different patients to come in, kind of do you think about these as different categories? Or just a better version of what we have today?

Well, I think both. I think for some people, they'll still but an oral alternative. But for many people, the longer-acting every 6 months will fit into their lifestyle. It will connect with when they see their physician for regular STD testing. So I think, clearly, the twice a year is very important. But to your point, I think the 1 year extends it to potentially even more people. Of course, some people will prefer the once a year versus the twice here. It's an intramuscular injection likely than a subcutaneous. So there's those pieces of it, too. But very importantly, in what you said back to kind of the underpenetration of the market here today. There are 700 new cases of HIV in this country every week, which usually astonishes people because -- and it's in very concentrated areas like we have down to the ZIP code level, where HIV is spreading. A lot of it happens to be in the rural south these days with populations that we have stigma and discrimination associated with HIV, where a daily pill is just not going to fit into their lives. So I do think that we bring more people into care with longer-acting. It's more discrete. We have different physicians that we'll be more comfortable with prescribing that. Black women in this country are more exposed to HIV, Hispanic men. And so when you get to different physicians that are not common prescribers for PrEP today, but you give them options that allow them to assure compliance for their patient population. I think our objective is to really get everybody that could benefit from prep into care and the longer acting, the once a year in particular, but also the every 6 months are going to be the type of product that will fit into those people's lives, into those people's circumstances. It could also be people that are in-house that just don't have access to daily medications. So yes, -- very clearly, it expands it. But most importantly, we want to have options as many options as possible in both treatment and prevention that meets people where they are. So whether that's once every day oral or -- once in treatment, for instance, or once a week or once a month or once every 6-month injection, different people will need different things for their life. We want to have every solution for people in both prevention and treatment that allows us to meet people where they are.

And to that point, I think the HIV treatment strategy that you've kind of developed has been that menu of options, kind of offering. And you're already the leader in HIV treatment with . This is a pretty incredible product. I think it's north of 50% market share these days and has continued to pick up even recently. You've also got a daily doublet launching this year, which is lenacapavir from Yasuo plus bictegravir from Biktarvy. We've also got a once-weekly oral launch also this 1 has shared with Merck also has lenacapavir in it, one of Merck's products plus a lot of the longer-acting agents kind of earlier in development. How do these future innovations fit together particularly given you already have dominance in this market, how do you think about kind of what does this do to your portfolio over the long run by continuing to introduce these new innovations?

Yes. Thankfully, I get to work with scientists every day that kind of never settle for great. Like they're constantly innovating. We got to a stage with treatment and prevention where it's hard to beat the efficacy results. So we've been moving and safety results and very low resistance results. So we've been moving from efficacy and safety to longer-acting options back to what we just discussed. So look, these things all fit in. I'll just talk about some of the near-term things that you mentioned. So importantly, BIC len, which is kind of our next expected launch in HIV is an alternative daily pill. But it's a daily pill based upon decades of research that kind of has the both -- it's a doublet. So it's 2 medicine combined together, but it's kind of the most advanced areas in each of those single medicines. One aspect of that medicine is lenacapavir. So it's a capsid inhibitor for those of you. It's lenacapavir is the first capsid inhibitor in HIV. So it's a brand-new mechanism that's shown to be very robust and very effective against resistance. The other one, the Biktarvy piece of that or the bictegravir piece of that is from Biktarvy. Putting those 2 together allows us to, first of all, meet people that may have resistance issues with other medicines on the market. But it also provides us within Gilead with the opportunity to provide people that want to switch and sometimes people do want to switch their therapies. In fact, about 20% of people on treatment regimens today, daily oral regimens switch in a calendar year. Today, we don't have another daily oral option for them to switch to. So they're going to switch, they may go to a competitive product with big len will have another daily oral option that is really on cutting edge science that they'll be able to switch to as well. So I think that's one aspect of our strategy. But then back to the long-acting piece of it. Yes, you mentioned we've got -- we're expecting clinical trial readouts in the second half of this year on islatravir, lenacapavir, should be the first in collaboration with Merck, the first weekly oral medicine. Again, that provides people with options that struggle to take daily, to take weekly. But we're not stopping there. We have additional weekly regimens that we're working on. We have additional monthly oral regimens. And then we have 2 kind of once every 6-month regimens that we're working on right now, there would be injectables. The reason those are important is, again, to get to those 30% or 40% of people that aren't virally suppressed today, but also to meet people where they are. Maybe they were able to take a daily pill at a certain stage of their life, but now they desire or want a less frequent dosing interval. So what you want to do in the innovation piece and never settling for great is just continually innovate to allow us to have the right option for that particular patient. And -- as I said before, the only LOE we really have in our portfolio is Biktarvy, which is in 2036. By the time we get to 2036, we will have launched multiple different long-acting treatment regimens that will meet people where they are. And as greater products as Biktarvy is and will continue to be a very important product until 2036 we will be less concentrated on our Biktarvy revenue by 2036 because of all these new entrants and new launches. So that's part of our strategy as well. Of course, meet people where they are with products that are even more advantageous to them than Biktarvy before the loss of exclusivity.

Fantastic. That's -- it's really exciting to see kind of that continued focus on innovation, even though the efficacy borrowers are already so high, those patients which is a really wonderful to see.

I would say 1 other thing if you allow me. I mean it's not commercially relevant to us, but it's very important to us at Gilead. 2/3 of the HIV cases in the world are in sub-Saharan Africa. And we have programs I'm really proud of what the team has done to get our medicines at no profit to Gilead or through voluntary generic licenses, royalty free to the developing world. And probably -- and we do this with treatment and prevention. But what I'm most proud of the team is it normally took at least several years between a product being introduced in the United States and being available in sub-Saharan Africa. With lenacapavir because of all the planning that went into really starting with the clinical trials because we knew this would be groundbreaking, we had it launched or are available in the first sub-Saharan African country in 5 months after the launch in the United States. And we've worked with Global Fund, we work with Peppa, the United States, the state department and then generic manufacturers, which should be entering next year to really scale this in sub-Saharan Africa in a way that reduces the incidence of this disease. It's important to me, but it's important to everybody that works at Gilead that we are doing our part with infectious diseases and particularly the no-no boundaries to suppress them globally and around the world.

Absolutely. No, it's incredible to see the impact that can potentially be had with these longer-acting agents in those environments where that compliance is even more challenging often.

Absolutely.

I do want to pivot away from HIV even though it is the core of Gilead kind of today and you are on this diversification journey. And you spoke about oncology, I mean you've obviously got kind different types of assets in that space, including kind of the Kite business. You've also spoken about inflammation. Recently, you announced 3 acquisitions in very quick succession -- there seems to be a theme with pharma companies this year, kind of lots of deals all at once. You announced an acquisition of tubules, which is in oncology, and this is an antibody drug conjugate. -- company, an acquisition of ARO, which is an immunology kind of T cell engager company, and you announced an acquisition of Arcellx, which is a CAR-T focused company with the lead there being a decel. How and why was Gilead able to do 3 transactions in such a quick succession. And as you think about the work still to be done, kind of where the portfolio gaps? What are the things you're looking for? Why are you looking externally rather than internally in building kind of this best diversified portfolio?

Yes. Terrific. Why there's a lot in there, but I'll try to cover, and you'll hold me -- keep me honest. What I would say is just because we're switching from virology to our other therapeutic areas. I think the team is very excited about what we're building in oncology. Today, it's basically 2 different kind of core anchors. One is -- and the other 1 is our cell therapy business, where we're the world leader in cell therapy. In both of those areas, we have new launches coming up. I mean in Trodelvy, we've got pending with the FDA right now of first-line triple breast cancer indication, which would more than double the market for Trodelvy, where we're already leaders in second line and beyond in triple-negative breast cancer. It's very important. And we have other Trodelvy readouts later this year in lung cancer and gynecologic cancers. And then with our cell therapy business, we are very excited about Anetocel.It's 1 of the acquisitions. So we'll talk about that. But in ESL, we see as a highly differentiated cell therapy product in multiple myeloma, which we can come back to you, but very exciting in terms of curative potential as we've seen with lymphoma, we're also pursuing in multiple myeloma disease that really needs options for patients as well. So that's just to kind of set the scene for oncology. Now let's talk a little bit about the acquisitions. The vast majority of what we're doing within the company comes from our internal research portfolio. In virology, now because of our established oncology portfolio, and inflammation, which we'll talk about. But inflammation -- the vast majority of the medicines that are in Phase II right now that you'll hear some more data on came from our Gilead Sciences. So I mean that's the core of what we do. Of course, we have to supplement that with external innovation. Number one, it keeps us honest. It makes sure that the things we're doing internally compete well with what's going on outside of our company. I always say you always want competitive pressure on your R&D portfolio. Every internal program should have to compete with the best science externally and vice versa. And we draw the bar high on that. So that's good. The fact that we just did 3 acquisitions in a short period of time, is not a reflection at all on the strength of our portfolio. It's the fact that there were 3 opportunities that just happened to come up at the same time. We've said our M&A strategy is the following. We do about $1 billion of M&A every year on early-stage assets. That's really important to feed our early-stage pipeline. And then we said, every couple of years, we'll do something of a larger size, kind of mid-single digit accordingly. Now the last time we've done something of a larger size is actually 2 years ago. That was Sema. That's Lidl, which is the product that is now really in a very exciting launch phase right now and doing very, very well. But we've gone 2 years. Now the reason we went 2 years is not because we weren't looking at things constantly through those 2 years. In fact, we scrubbed everything that came available in all 3 of our therapeutic areas. But we were also -- we said we're going to be proactive and disciplined because we have a long time before our LOE and because we have a robust internal portfolio, we have our own metrics in terms of what discipline means, but it is a high bar. So first of all, it has to fit in our strategy. Secondly, it has to be really transformational medicine. But b, we have to be confident that we're spending our shareholders' money in a way that makes sense. We're not going to pursue something behind a reasonable intrinsic value analysis. And so that's really important to us. And that's why we haven't done things for 3 years, not because we haven't seen interesting things. But in some cases, and we've been involved in many transactions, we've stepped away because of the disciplined piece of it. But the 3 of these, we were able to find the sweet spot all at the same time. It was opportunistic. We have a tremendous cash flow in our business. So we have lots of firepower to put to work. We don't feel like we have to put it to work, but we are capable of doing 3 in a row like this. And each of them is very different. -- happy to -- we can talk as much or as little about them as you want. Arcellx is that cell therapy, multiple myeloma product that we had a partnership with -- but we felt like owning it outright. This was the right time to do it, both from a valuation perspective but also a strategic perspective. We may come back and talk to that. Tubulus, a very important platform play. We acquired Trodelvy, gosh, about 6 years ago now, 5, 6 years ago. It's this antibody drug conjugate. It's similar to cell therapy. It's a novel kind of approach to cancers, you're killing only cancer cells and saving normal cells in your body. But we have been looking for kind of the next-generation ADC platform for about 5 or 6 years after Trodelvy and haven't found it until we found Tubulus. We think Tubulus is really unique. It's a private company in Germany. We had a research collaboration with them. But we think -- and ADCs are made up of a protein, a linker and then a payload. The payload is the killing function, the protein attaches to cancer cells. And the linker is really important because the linker makes sure that you don't discharge your chemotherapy before it attaches to the cancer cell. I won't get into more detail on that. Other than we think that the Tubulus platform is met our bar of truly differentiated and unique. In other words, it has a really good therapeutic index. It allows us to get to cancer cells in a way that has low or minimal side effects, which is particularly important when you talk about combination therapy. So if you use an ADC in combination with another agent, whether it's a biologic or chemotherapy, you want this ADC to have a really good therapeutic index. So -- we're very excited about that. The lead program is an ovarian cancer program where we think we -- we believe we can be best in class, and we're progressing that very, very quickly. But it's important to know that with tubuli -- that is a very broad platform that we can take into other types of cancers with other payloads and other linkers and other proteins. So it's much more than a single product acquisition. It's really a platform acquisition that fits really nicely in our portfolio. And then finally, the Oro transaction is exciting. It's earlier stage. It's more of a single asset, but it allows us to think about B-cell depletion in autoimmune disease inflammation largely. And what that means B-cell displetion for those of you that aren't deep in the space is it's kind of the next stage of advancement in autoimmune diseases by allowing you to kind of reset the immune system in an immune system that's gotten haywire for whatever reason, in a person's body. So I think that's kind of how we think about those 3, and we're going to -- we're very busy now integrating those companies in and delivering on those.

Absolutely. I'm sure there's a lot of work to do for the I do want to spend a moment on an EDL especially, particularly given that you've got a launch ideally that's upcoming with a PDUFA date with the FDA in December. How kind of -- can you touch a little bit -- you mentioned it briefly, but can you touch a little bit on the efficiency that you believe is gained by wholly owning this asset. You mentioned valuation, but also other benefits. And can you think about framing for us kind of where you think the Street is under appreciating kind of the potential of this asset even in those first early years, kind of we look at some of the metrics around the CVR deal terms, especially the goal and the milestone there is quite distinct compared to -- it was almost double what -- the Street is expecting over the same period. And so understanding what do you think the Street is getting wrong about that launch would be really fascinating.

Yes, absolutely. Maybe just to frame what this is. So Anita cell is a onetime cell therapy that is used in multiple myeloma that has the potential to really transform the course of the disease. It's a BCMA-directed therapy. The reason we're -- there are both strategic and financial reasons for why we decided to own all of our sellers. Let me concentrate in the strategic areas. The reason we think this is a unique asset, there is another cell therapy asset available out there. And it has a profile and such that it has neurotox side effects, some severe neurotox side effects. The reason that's important is that as you go into earlier lines of therapy, multiple myeloma can be a disease that people live with for 10 years. Eventually, there is no cure for multiple myeloma. But as you go up in the earlier lines of therapy, the benefit/risk profile becomes even more important, right? We haven't seen any neurotox side effects in a needle cell. So while it can have while south therapy can have a significant impact on multiple myeloma you don't want to, in turn, give somebody another disease that they live with for the rest of their life. And we -- even though that chance is smaller from a percentage standpoint, you still don't want to enter that into the equation. So the strategic reason to fully own a Edatel and this very competitive but also a large market. It's around a $20 billion market, all therapies within multiple myeloma is that we need to move fast at this stage. We had derisked in our collaboration with our Calix to a degree where we felt comfortable owning the whole thing for us and our shareholders. That allows us to -- it's going to start in fourth line plus multiple myeloma owning it alone, anytime you have a collaboration with another company, things slow down. And we have a huge sense of urgency around this. So the ability to get into second line, first line, potentially even the smoldering myeloma drastically improves. And therefore, the area you're under the curve of your revenue improves if you own it outright. So that's also the financial aspect. The other thing is this product is so unique that to have the rights to be able to use it in kind of next-generation cell therapy, which is the in vivo cell therapy was something we didn't have in our current collaboration. So this gives us full rights to use this construct in kind of future areas, which, again, I think is very important as you think about the overall strategy. And then finally, any time you have 1 product, 1 company over 2 companies, at a launch period of time, we think there's efficiencies to be gained by having a single company launching. You only get 1 chance to launch a product correctly. And I think it just gives us a chance to make sure we get the best launch accordingly. And then finally, from a valuation perspective, I mean, clearly, we know this asset better than anybody. We were the natural owner of this asset in its totality. I think we see the potential of this stronger than the Street or intrinsic valuation is clearly stronger than the Street. Plus, we had economics associated with our partnership, including royalties and milestone payments that we now take off the table and incorporate. So we feel very good about the financial aspects. There was -- I think it was a unique window of opportunity to think about acquiring it outright in terms of where our Selic was trading and how -- the Street fell it was and how we felt it was. So there was a real opportunity to kind of I think, a onetime opportunity to own that outright. And we intend to be very focused now on executing on this and delivering on that.

Absolutely. And you mentioned that, obviously, you've got kind of 4 and more launches in flights are on the way. You've got kind of these -- the internalization of these recent acquisitions. -- does that take kind of M&A off the table for a while in terms of you've got -- you've just got your hands full. How are you thinking about kind of continuing to add to the business over the next few years?

Right. As I spoke about, about $1 billion of our M&A every year is on the early stage stuff that will continue. Clearly, we have -- we want to concentrate on integrating these assets -- so I think by very definition, in the very near term, I wouldn't expect that we're going to enter into many more transactions. Having said that, you always keep the opportunity open. I mean just to put it into context, -- we are a very strong cash-generating business. And even with all 3 of those acquisitions, 11-some billion combined, we'll be at the same net debt level at the end of this year as we were before these acquisitions. So just to put that into context, it's -- we have -- my point is we'll have firepower in should we need to use it. Having said that, just pragmatically, we've got these to integrate and we're going to continue to stay proactive and disciplined in our approach in M&A. So I'm comfortable that we always have that opportunity again, because of the robustness of our portfolio, there's no urgency. There's no fire drill going around that. Every external asset has to compete with our internal portfolio that's getting stronger and stronger every day. So I think that will be our approach. But as we've always said, we always want to make sure we are complementing our internal portfolio with attractive and interesting late-stage opportunities with some regularity every couple of years on.

And as we think about this portfolio continuing to diversify, you'll have a kind of an increasing portfolio of Phase III studies that are ongoing. It appears at least kind of looking at all the different things that are perhaps getting ready to move into that pivotal stage. Should we be thinking about R&D spend in absolute form increasing at Gilead as we think about kind of fully realizing all of these opportunities you're bringing into the pipeline? Or are you getting more disciplined at prioritizing which Phase IIIs and so envelope will stay roughly the same. How are you thinking about kind of that investment in future innovation kind of getting to -- translating to revenue through pivotal studies?

Yes. Look, I'm very comfortable with the percentage of R&D spend we have right now at Gilead in relation to our revenue it's roughly 20%. And I think that equates to good quartile spend across the industry. I think we should be disciplined about that. We had to increase it over the past 7 years. We were kind of at the low teens level when I came in. Hard to drive a business in the medium and long term at that kind of investment level in R&D. So we have purposely and with shareholder support, been able to increase that number to a percentage that I think is competitive and important -- and there's a couple of dynamics on that. Even with all 3 of these acquisitions, we will still -- we'll have -- as we talked about in our first quarter call, -- we have a slight increase in R&D expenditure this year, but it's all in our guide and manageable or in a revised guide, and it's still in that 20% range. As you know, with the portfolio in biopharma, you constantly have clinical trials rolling off and new trials starting. And that's how you kind of keep that 20% R&D investment, keeping the bar high while still maintaining your focus on discipline and approach there. So I would say because that's an important line item in our P&L, of course, and an important part of our margin story. -- it's why we -- it's why I continue to remain confident that we will continue to have top quartile operating margins in the future. We'll be disciplined in operating expenditures. We have lots of opportunities to continue to improve our productivity in the organization while we're growing and while we're investing appropriately in R&D and SG&A, but we really want to scrutinize everything we're spending and stay a high-margin company and a good return for shareholders.

Absolutely. You've led me to where I wanted to go next, which was kind of AI and the potential for AI in the industry at large, but specifically at Gilead. I think we're hearing from lots of companies that they are looking for productivity or efficiency gains and lots of different parts of their business, be it the SG&A, be it some of the back-office operations, be it even some of the operations in R&D. We're also hearing consume that they're beginning to kind of see opportunities in the innovation lever also being bent that curve also being improved by the application of AI and investments there. Can you just give us some context? Is that how Gilead is and how you are thinking about the potential for AI and in your business? Where could it add value? When might we see the impact of this? And what are some of the practical things that you're seeing improvement on today?

Yes, terrific. I mean it's something I spend a lot of time on because if I'm up in the middle of the night, I'm thinking about the opportunity, I think that AI presents to accelerate what is already a fast-growing additional understanding in biological sciences combined with kind of AI and all the things you just spoke about. So I think broadly speaking, there are -- 2 very large kind of buckets that we think about in AI in the company at Gilead, and it's not that unique per se. But 1 is making sure we enable every employee to be more effective at their job. And so we've rolled out copilot to every single 1 of our employees, and we're really training and encouraging people to do individual experimentation to make themselves more productive. And it's too early to kind of tell exactly how that's playing out, but anecdotal feedback is very strong. The other 1 then is to your point, just fundamentally looking at use cases in our business that allow us to reduce time lines, increase success rates and reduce overall costs and expenditures. So I think the lower hanging fruit there is kind of what you articulated, the productivity gains, whether that's in particularly the development part of our organization, manufacturing and sales, but also G&A. And I can say we already are benefiting from those, right? It's still early days, but I think we're definitely benefiting from that I'll give you a couple of examples. I mean on clinical trials, we're able to shorten clinical trials by being more effective at using AI with identifying clinical trials. We're able to reduce the period of time it takes from last patient central and data close to regulatory filing. Even if you're saving weeks or a couple of months, that makes a big difference. And that's why I'm also confident in the margin side of our business that we're just at the early stages of trying to pull all that productivity gain through. I think -- the more challenging thing is something that is, I think, sometimes oversimplified is its application to early-stage research. And if you like, new target discovery and new target development. While I'm very excited about that, and it is starting to -- the classic example but uses here is protein folding -- and if protein folding took 18 months in the past and you bring it down to 6 months, that's a significant advance. But -- when you think about AI application to early-stage research and discovery, there's a couple of things that I'm reminded by my scientists of all the time. Number 1 is, unlike maybe other industries, what we know about biological sciences is actually very small, probably less than 10% biological knowledge, we actually know today of the trillions of cells in our body. So that means that 90% is unknown. And of course, AI works really well when you're applied to well-constructed model. So sure, it will help us accelerate our knowledge of the other 90% without a doubt, I'm convinced that will occur, but it's also not going to happen overnight. It will take human beings and human ingenuity to grow that. So I think that's the first thing. The second thing I would say is if you think about research discovery, so identification of a molecule up until baby entry into humans, let's just say that's a 100-step process. There are probably 5 steps of those problem. I'm just using an example that are being accelerated. But there's like another 80 that still need -- I mean you need wet labs, you need to test that AI generated molecule in animals and then in humans. And those things aren't necessarily growing any faster today. So I'm very confident -- let's just take a lenacapavir took 17 years to get from concept to an approval. I'm very confident in the next 5 to 10 years, we'll see that time period go down drastically. It's not going to get down to 2 years, but let's say it went down to 10 years or 11 or 12 years. The massive R&D productivity improvements in our industry that we'll be working with. So I'm sobered by what my scientists tell me, but I'm also very clear eyed that we have to keep up with this and make sure that we're on the cutting edge of this.

Absolutely. Absolutely. No, it's an incredibly exciting time, but there are long cycle times it takes a long time to see that pay off. And certainly, for our observers on the outside, we're kind of trying to pay through kind of all the blindfolds you guys have around all the great innovation you're doing to try and figure out when might we see kind of the real impact on that innovation question. Just in the last couple of seconds that we have. You mentioned margin and kind of Gilead has obviously continued to hold a very high margin and perhaps even expanded it even more recently. In some ways, when you look at companies that have done that, it's where they have real concentrations of their business. And we know HIV kind of scale. -- really affords kind of that -- some of that efficiency in your organization. Is this something that can still hold as you diversify your business? How do you think about that evolution?

I mean, obviously, margin is a function of where your opportunities are and where you're heading. I'm very confident that for a variety of reasons that will continue to be a high-margin business. Number one, I think the therapeutic areas that we are concentrated on are generally higher-margin businesses overall. Number two, back to the conversation we just finished, we're continuing to have a real focus on our operational expenditure we've come a long way in the past 7 years. But I'm also convinced we still have a long way to go at Gilead. So continuing to focus on the cost base as well as the gross margin base on a particular therapeutic area are both dynamics that I think we're going to continue to manage accordingly here. So I'm confident that if you bring -- if you keep the bar high enough for transformational innovation, that society will reward that accordingly. So when I think about the difference that lenacapavir could make for every HIV person that's infected, that's a lifetime cost of about $1.1 million, $1.2 million. So when you think about the economic benefit to society of transformational innovation, that's also something that we keep the bar high on a Gilead and allows us to be confident about our margin story.

Fantastic. What a wonderful place to end. I think we kind of looked back to where we began on innovation being so central to Gilead, but also to the industry at large. Thank you so much, Dan, it was a pleasure talking to you.

Thanks for having me. I appreciate it.